Economy Alarm: Deficit Will Hit A Record High Under Obama-Pelosi Agenda

February 1, 2010

Deficit Will Hit A Record High Under Obama-Pelosi Agenda

Administration Throws Fiscal Responsibility Out the Window, Asks for a $3.8 Trillion Dollar Budget for 2011


Democrats Would Like Taxpayers to Believe the Deficit is “Central” to Everything They Do


“With the recovery package, we not only created jobs – about 2 million saved or created with more being rolled out – but pulled us back from the brink of even deeper recession. In his [President Obama’s] budget, which we passed one hundred days after his swearing-in, he had a blueprint for how we go into the future, create jobs, stabilize the economy [and] do so as we reduce the deficit – [it’s] very central to everything we do – reduce the deficit.” (Matt Cover, “Pelosi Says Jobs ‘Permeated’ Congressional Actions in Year of 10 Percent Unemployment,”, 1/25/10)


Credibility Crash: Federal Deficit to Hit $1.6 Trillion Under Obama-Pelosi Agenda


President Barack Obama will propose on Monday a $3.8 trillion budget for fiscal 2011 that projects the deficit will shoot up to a record $1.6 trillion this year, but would push the red ink down to about $700 billion, or 4% of the gross domestic product, by 2013, according to congressional aides.


The deficit for the current fiscal year, which ends on Sept. 30, would eclipse last year’s $1.4 trillion deficit, in part due to new spending on a proposed jobs package. The president also wants $25 billion for cash-strapped state governments, mainly to offset their funding of the Medicaid health program for the poor.


To get the deficit down by the middle of the decade, Mr. Obama will be relying on cuts that have previously been proposed without success, on cooperation from a wary Congress and on a yet-to-be set up debt commission to suggest politically difficult choices.


At the same time, Mr. Obama is under pressure to address the country’s continued high unemployment rate. And he will propose increases in spending for priorities such as education and domestic scientific research. All of this raises questions about how much progress the president is likely to make in trying to fulfill his pledge to half by 2013 the $1.3 trillion deficit he inherited.


The budget embodies Mr. Obama’s larger predicament of needing to contain the deficit without harming the economy, which remains fragile. The deficit has become a major political issue, as antigovernment activists swing independents against what they describe as Mr. Obama’s big-government policies and Republicans try to regain the mantle of fiscal responsibility after the Bush years saw surpluses swing to deficits.



The proposals include consolidating 38 education programs into 11, cutting the National Park Service’s Save America’s Treasures and Preserve America grant program, and eliminating the Advanced Earned Income Tax Credit, which allows low-wage workers to get tax-credit checks in advance but which is rife with abuse, White House officials say. The Brownfields Economic Development Initiative, which converts decayed former industrial sites to new uses, would be cut, and payments ended to states to restore abandoned mines, many of which have been long cleaned up.



Mainly, the president plans to rely on the budget commission and budget rules in an effort to try to force Congress’s hand. The budget assumes the enactment of pay-as-you-go rules that would force any tax cut or spending increase to be offset by tax hikes or spending cuts.

Isabel Sawhill, a budget expert at the Brookings Institution, criticized the president’s goal— a deficit of 3% of GDP long after the recession has ended—saying it amounted to “defining deficits down.” (Jonathan Weisman, “Deficit to Hit All-Time High,” Wall Street Journal, 1/31/2010)


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